This post may be more timely than most, as the topic of the Federal Reserve seems to have been in the news lately, and my topic for today is "what is inflation?"

While our current recession had made people believe inflation is not a worry, as macro-economic doctrine argues inflation and recession cannot co-exist, everyone would do well to recall that not only during the late 1970's, but during the early stages of the Weimar hyperinflation, inflationary price increases existed quite comfortably with job losses and slowed or negative growth. And, as I will argue shortly, even if we do not worry about the price increases we see around us, we should not forget that inflation, properly defined, is taking place every day, and is something that should continuously concern us, even if we have learned to live with it. The 3% to 5% price increase we see yearly is not "normal", and learning to accept it is not a sign of economic maturity. Instead it is more like a man with lung cancer learning to say "it's just a cough."

I should probably start by properly defining inflation, as that is the tradition in such essays, not only mine, but those of Hazlitt, von Mises, von Hayek and others. The term has been so horribly misused, almost always redefined to confuse the symptoms with the cause, so that simply properly defining it often comes as a revelation to the reader. On the other hand, I think ti may be useful for the moment to continue to misuse the term, to use the vague popular understanding, at least to help make my first point.

Inflation, or more properly the general increase in prices modern readers call inflation, is a modern phenomenon. Prior to the birth of not just fractional reserve banking, but central banks as well, it just did not exist. There was nothing like the present 3% to 5% yearly increase in prices in pre-modern times. In fact, during times of stability in growth, there was a tendency for prices to gradually decline (as they also did in the US during the period of the 1880's). This was somewhat offset by new infusions of gold or silver, which caused the value of the currency to decline slightly, but for the most part prices tended to remain flat or decline slightly, there was no general rise in prices.

Actually, allow me to correct that statement. There was one phenomenon which slightly resembled modern inflation, but it was considered a shameful act, and so was not carried out on a regular basis. That was the debasing of currency. Monarchs, in dire straits, or in moments of massive fiscal irresponsibility, would change the composition of their coins, including less gold or silver and more base metal¹, in order to allow a given weight of gold or silver to produce more coins. However, once this was discovered by the public, the value fot hose coins would fall, and, in a phenomenon similar to modern inflationary price increases, goods priced in those coins would experience an overall increase. However, unlike modern times, during the period when gold and silver were used as currency, foreign coins generally circulated alongside domestic, and old coins were circulated with new, so the most common effect was for the new debased currency to simply be traded at a discount against older and foreign coins. In other words, by debasing the currency, a monarch just made his coins less valuable than their face worth.

And that should explain why this debasing of currency was seen as such an immoral act. Because, unlike modern inflation², the theft is quite obvious. Coins circulated on the premise that they had a given quantity of gold or silver (and sometimes copper or bronze for smaller denominations), and people accepted them on that basis. They were, in effect, not trading their goods for a certain value in currency, but for the amount of precious metal that currency contained. And so, when a monarch issued debased coins, he was, in effect, committing fraud, exchanging counterfeit precious metals for goods. And that was why such acts were generally done quietly³, and monarchs were normally reluctant to admit to such measures⁴.

At this point I am sure many are asking why I have gone into this lengthy history lesson⁵.  The first half, the part about inflation not happening in the past, clearly had a point, but why all the talk of debased currency? To which I respond, because modern inflation is nothing but the same practice, carried out on a regular basis, but without the victims being able to hold on to older or foreign coins of known value⁶, and with the rulers being able to force debased currency even on those who refuse to trade. And, the greatest difference of all, with those debasing the currency doing so without any sense of shame or regret, and, at the same time, with a public growth apathetic and uninterested in the steady erosion of their wealth.

And, having said that, I suppose that time has come for that traditional part of every inflation essay, the definition of inflation and the revelation most readers have been misusing the term. You see, "inflation" is a very specific technical term, or was, until the popular press took ti over, misused it, and, politicians, finding the improperly defined term was advantageous for their purposes, adopted the mistaken use, and encouraged this mistaken usage⁷. But we will cover all that in some detail after the definition. For the moment, let us ignore why the term has come to be used improperly and look instead at what the term means, or used to mean in the past, and still means when used correctly.

Inflation means nothing more than an increase in the money supply. That is all. Drawing on the analogy of the money supply to a balloon, it just means adding more money, causing the economy to inflate. And, to be fair, not all inflation would be harmful. Under a gold standard, without any fractional reserve banking, the money supply could only increase with infusions of precious metals, and, while that would cause a brief increase in prices, it would not have the negative consequences of modern inflation. Even with fractional reserve banking, without a central bank and with specie redemption as a check on expansion, increasing money supply would not be harmful, as banks would inflate only to the degree business considerations allowed. And, of course, in the second case, the inflation of one bank would only effect those holding that bank's notes, and as such notes are legally redeemable in specie, unless the bank declares bankruptcy, even those holding the notes would be able to reclaim their value in coin⁸.

But in modern terms, with central banks and currencies backed by nothing, or by government debt, inflation is a clearly harmful practice, despite the claims of some⁹. It amounts to a modern incarnation of debasing coins. The government, through various processes¹⁰, increases the amount of currency in circulation. As this money has no fixed value, not being tied to a set amount of a commodity (as it was when dollars were redeemable in gold), the value of the currency is defined by the amount in circulation (and market expectations¹¹). So, when the government prints more, it effectively "debased" the dollar, making each dollar worth less.

And this is where modern inflation far surpasses the ills of debasement. Debasement, for all the evil it did, was limited. Coins were minted relatively infrequently, so in general debasements took place every decade at the most. And once a debasement was noticed, and prices adjusted, life returned to normal. In addition, the debased currency usually only harmed those who either accepted it from the government, or from others, before the reduced metal content was discovered. Those holding coins from prior pressings were not effected, nor were those who later traded the coins at the proper discount.

Not so with inflation.

The problem with modern inflation is that it can be continuous, and it has universal scope, or nearly so. The government can effectively run the presses nonstop. As currency is based on "reserves" measured in government debt, the only restraints on monetary inflation in the US are the mandated reserve ratio of debt to money supply, however defined¹², and the amount of debt the government has to sell. And, as the government can always find something else needing money, or as a last resort can refinance old debt, that second item is no check at all, meaning there is effectively no limit to the amount of inflation in which the government can indulge. And, when they inflate, it does not just effect those who accept the new dollars. Unlike old debasements, it is not just the new dollars that lose value, but all dollars. Meaning that anyone who is holding currency, who has a contract whose payment is denominated in dollars, or in any way expects a future payment in currency, will have their wealth reduced.

Actually, there are two other differences. First, the politicians don't seem at all ashamed to be eroding the value of the currency. Second,t he public doesn't seem to care either.

Let us deal with the second first, as it is related to something we already discussed, the mistaken definition given to "inflation". The general public, if we are honest, does not have much interest in the technical aspects of economics. Partly because misguided econometrics fans have turned it into a shoddy sibling to mathematics¹³, but mostly because they have a general grasp of the basics (supply and demand, for example), and think any additional information is unnecessary. As a result, the public has bought into a lot of theories which, while beneficial to those promoting them, are just not true. For example, the belief that there is a "boom-bust cycle" inherent in a free market economy. Or the mistaken definition of inflation. Both of those are promoted by any number of sources, but are completely wrong.

However, both serve the purposes of the government and others. As long as the public sees "inflation" as a "general increase in prices" rather than an expansion of the money supply, they won't realize there is a connection between the 3%-%5 loss of value their money undergoes each year and the Fed's creation of currency, or, worse still, the government's inability to control spending. They can be led to imagine in such spurious creations as "cost push inflation", or to imagine that inflation is just an inevitable part fo the economic system. (Which is why I started by pointing out its modern provenance.) They can be convinced to ignore the role that artificially low interest rates play in the overheated economy which always precedes a recession. They can told to ignore all the ways that manipulation of currency effects their lives, and, more importantly can be taught that gold is an anachronism which would wreck the economy.

Now, I don't want to sound like a conspiracy theorist here. These theories are not being explicitly pushed by some cabal, they are promoted by individuals with individual interests, some of whom truly believe what they push, some more cynical. Some, such as monetarists and some Keynesians, really think gold is harmful by "constraining" government. Others, especially in government, don't know whether or not gold is harmful, but do know the current system makes spending easier¹⁴, so push in its favor. And so the public recieves a message from any number of sources, for any number of reasons, telling them the current system is beneficial, inflation is an inevitable rise of prices and gold is a harmful relic of the past. There is no sinister cabal, just a confluence of interests which all push in the same (wrong) direction.

And so the public tends to ignore inflation. Having lived with chronic, massive inflation since the early 1970's, and slower, but still chronic inflation since the dawn of the 20th century, people have come to see inflation as part of life, the same way they believe unemployment is inevitable, eliminating public education is unthinkable, and any number of other government programs or their outcomes are just "facts of life" as they have been in existence for most or all of their lives. (See "An Example of Inertia".) It helps that they mistakenly use "inflation" to describe the increase in prices, rather than the monetary expansion which causes it, as breaking that connection allows them to ignore the origins of inflationary price increases, and so to think of them as inevitable. The same way the myth of the "boom-bust cycle" being inherent in the free market obscures the role of monetary manipulation there.

And, thanks to public apathy,  the politicians see no reason to feel shame in expanding the money supply. Of course, in many cases, this is because politicians are as oblivious as the public to the causes of inflationary price increases. Don't forget politicians come from the general public, they go to the same schools, read the same papers, share the same biases, and are ignorant of the same truths. So many politicians do not recognize their role, or the role of their budget deficits, in the constant erosion of the dollar.

On the other hand, there are a considerable number who recognize some connection between currency and inflation. Some only in the simplistic and imprecise terms often used by the newscasts, that somehow the Fed "prevents inflation" thorough currency manipulation, other with a more Keynesian understanding, that postulates monetary policy must balance out inflation versus unemployment¹⁵. And so, these politicians, backed by such beliefs, and the academics who promote them, often feel that, despite the harm done by inflation, their efforts at money management are beneficial.  The lack of guilt they feel over the gradual theft of inflation is assuaged either by the belief that "inflation is inevitable" or else by the belief that the harm of inflation is offset by some good that the inflationary policies bring about.

Which brings me to my polemic bit. Normally these bad economics posts just point out the errors behind certain economic beliefs, but, in this case, I think the harm done by the public's mistaken understanding of inflation does such harm that I need to make something of a plea for ending our inflationary policies. Ideally that would include a commodity currency and a fully free banking system. But, as that is unlikely, as a first step I would propose that we adopt either a fixed quantity of currency, or, if that is too frightening for dyed in the wool monetarists, a fixed percentage increase every year. It would still be theft, but at least it would be a theft for which we could make allowances and prepare.

So, why this polemic? Why the plea for a major change to how we handle money? Because inflation doe snot just amount to theft, thought it clearly is theft of the most unsavory sort, striking at those who can least afford it as well as those who do the most good for the economy, but because the repercussions are even worse. The uncertainty it creates is damaging to domestic economics, and the international damage done by nations competing to devalue their currencies at the time most beneficial to them and harmful tot heir rivals adds unneeded strains on international relations. Not to mention the other distortions in both economic and social behavior caused by inflation and the mindset it creates in the public at large.

Allow me to explain.

First, let us deal with the simplest of economic impacts, the theft. Inflation is nothing but an involuntary transfer of wealth from those holding dollars to the government. In addition, it also takes away from those who expect payment which is denominated in dollars, without benefit of a COLA or other escalator clause. For example, those on a pension without COLAs or seniors who bought annuities. Also those who suffered an injury and are on fixed disability payments, or living on the proceeds form a legal settlement. All these people on fixed incomes, unless protected by escalator clauses, tend to feel the burden of inflation worse than others, as the erosion of the value of the dollar eats away at their income worse than most.

Of course there are other victims. Of course, we are all victims tot he degree we hold currency, or have any future payments coming to us, but some are hit more than others. In addition to the fixed incomes mentioned above, the next worst hit are those who have saved considerable amounts. Be they newlyweds saving to buy a house or have a child, or investors hoping to start a new business, existing firms saving to expand, or hard workers saving for an early retirement, inflation strikes at such individuals as well¹⁶. As the amount one loses to inflation is directly tied to the amount of currency one holds, or expects in future transactions, those saving, as well as those with outstanding payments due to him, tend to be hit hardest. And we see this in inflationary periods. At first, the early enthusiasm of incipient inflation causes a building and investment boom, as easy money is snapped up by firms. However, as inflation grinds on, we see fewer and fewer with any money to invest, Venture capital dries up, investment funds dwindle and housing starts fall. That is the outcome of the erosion of savings.

But that is not the only harm. Yes, inflation is theft, and yes it takes away hard earned money from those who most deserve it, but it has other, less obvious effects. As I mentioned, the struggle to use timely devaluations to help one nations trade at the expense of others causes countless international strains that could have been avoided¹⁷. But even when nations do not engage in explicit "beggar thy neighbor" policies, the simple fact that one has engaged in fiscal irresponsibility can often have a harmful impact on other nations. Just look at how our present slump has effected our trading partners. Does anyone think that other nations do not change their behavior towards us based upon the way we conduct our finances, and the likely impact it will have on that nation?

But let us ignore international affairs, and keep our eyes on our nation, and ask how inflation effects economic matters beyond the simple loss of value. Everyone can recognize that inflation manage sot change interest rates, first driving them lower for a short time, and then making them soar as expectations of future inflation are built into the interest rate. Likewise, everyone can see how prices race ahead of the growing money supply as business anticipate that replacement costs will be higher than present costs and so build in a cushion to allow for the uncertain price in the future. But are there less obvious effects?

Of course there are, and I hinted at the cause when I mentioned uncertainty above¹⁸.Inflation plays havoc with the monetary system we use to make our measurements. Our entire accounting model is based upon the idea that money will remain relatively stable in value over long periods of time. Once that is no longer true, even if we try to compensate with adjusting entries, our calculations break down. When money is no longer constant, businesses have problems adjusting for depreciation, adjusting for replacement cost of stock and so on, and thus cannot figure out the proper value of their income, or even whether they had a profit or loss. As a result, many businesses end up paying out capital as dividends, and, looking profitable on paper, actually draw investments while they are suffering losses. As a result, the economy tends to become distorted, with unprofitable firms growing, while firms which are truly profitable (if any remains so in this inflationary period) close their doors.

Nor is accounting the only area which becomes chaotic. Planning becomes almost impossible. When savings depreciate at an unpredictable rate, while future prices are certain to rise, but to what level no one can predict, it is impossible to put together a ration plan for future expansion or to open new firms. New firms do open early in inflation, when the excess currency makes borrowing easy and every new idea, viable or not, gets some share of the money, but once that enthusiasm has worn off and true inflationary lag has set in, it becomes impossible for firms to either save for their own expansion, or find an investor willing to save to invest in their firm. The uncertainty makes investment, as well as savings, risky ventures.

Finally, it becomes very difficult to read the signs normally provided by the price system. For the same reason accounting is impossible, prices are inaccurate and impossible to compare. As a result it is difficult, or impossible, to tell what consumer demand truly is, and what it will be profitable or unprofitable to manufacture. In addition, thanks to the distortion of foreign trade incentives due to currency exchange differences, companies often end up over-producing for "lucrative" export, which turns out, when adjusted for inflation, to be losing money. While on paper the exchanges appear profitable in money terms, in absolute terms companies often end up exporting at a loss, not realizing it due to the inflationary distortion of monetary prices. And thus, not only does inflation cause improper payment of dividends, mistakes in the recording of profits, and distort investment in general, it short circuits, to some degree, the entire price system, making the free market less efficient, as the single means of gathering information on consumer valuations no longer functions properly.

Finally, beyond these economic impacts, inflation also causes some changes in our behavior itself. At least in the way we choose to conduct ourselves. You see, thanks to inflation, the normal, prudent actions of civil society begin to carry a very heavy price, a penalty, and so we have to balance prudence against the consequences of inflation. Where normally we would save against future mishaps, and would not simply borrow for the sake of consumption, with savings being destroyed by inflation and inflation eroding the costs of borrowing, we develop a tendency to live in heavy debt, as immediate consumption, as well as borrowing to consume more is actually a sensible approach to inflation, minimizing the harm done while maximizing our benefits. Many of the acts of fiscal irresponsibility decried by critics are actually encouraged by an inflationary environment.

Combining this environment which discourages prudence and foresight,and which encourages immediate consumption, with the uncertainty of an economic system under inflationary pressures, and it is easy to see how inflationary environments could encourage one to develop a rather irresponsible "apres nous le deluge" type of perspective. If savings will only be destroyed by time, if we cannot anticipate whether or not any given avenue will be fruitful, and even if we do, we will likely not be able to save enough to exploit it before inflation eats up our savings, then what is the point? Why not live for today? Borrow what you can to enjoy the good life, and then either pay it off in depreciated currency, or refinance it with cheaper money?¹⁹ What is the point in doing anything more if time will erode all our gains?

And that may be the biggest harm of inflation. Traditionally time has been the friend of the prudent. We save over time to build up a nest egg, we pass on savings to our children so they can live better. Over time money grows and businesses expand, everything gets better in the fullness of time. But inflation makes a mockery of that, making time the enemy of savings and growth. And, while critics of the inheritance tax recognize that it destroys a traditional means of passing on our wealth, making things better for our children, at the same time those critics make no mention of our fiat currency and central banks, and the way they erode our savings even more quickly²⁰.

I think I will wrap this up with that final thought. Clearly there remains a lot to be said. What we should do to prevent future inflation, how we should organize our monetary system, our banking system, and so on. But I have written far too much already. Those topics will have to wait for a future post. I suppose those still curious could follow the links in this post and the footnotes, as they cover those topics in some detail, but for those not so inclined, I would recommend "Why Gold?", as it is probably the most concise answer to those remaining questions. I could, and eventually will, expand on what I wrote these, but for now it should provide at least a bare-bones description of the system I see as the best remedy to inflation.

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1. Currency always contained some amount of base metal, at least gold currency. Gold is, as most know, a soft metal, which is why jewelry tends to be either 14 or 18 karat. The addition of base metals prevents gold from deforming, and allows gold to hold more intricate features, such as the images and text on the face of a coin. Were coins made of pure gold they would quickly deform into featureless disks. However, the assumption was that the traditional ratio of precious metal to base metal would be constant, which was not the case when coins were debased.

2. I do not mean to imply inflation is not theft. It is just a less evident theft.

3. Of course the act was also kept quiet not just out of shame, but to keep up the value of the currency as long as possible. Once the debasement became known prices would adjust to the new reality and the monarch would lose the advantage of trading coins at a value greater than their metal content would support. In short, once the fact became known, he could no longer defraud those with whom he traded. So shame and greed tended to both point to the same course of action, keeping silent.

4. Only in modern times was the "devaluing" of currency considered a "clever" political masterstroke. During the protectionist early 20th century, when currency was still tied to precious metals to some degree, it became considered an act of genius to stage a surprise devaluation and gain temporary monetary advantage over rivals. Completely ignoring the impact of such acts on those holding currency. But as these devaluations more resemble modern inflation than currency debasement, we will deal with that in due course.

5. Regular readers know that I usually have a point to such historical digressions, though, in a few cases, the point was nothing more than indulging the whims of a writer who once wanted to be a history professor. But in most cases the digressions serves a slightly more practical purpose.

6. Until FDR outlawed holding monetary gold in 1934, citizens could hold gold or silver coins to avoid inflation of paper currency, and, as those living through hyperinflation in other nations discovered, one can always flee into concrete values, buying any goods to store the value of the currency before it depreciates. But, as one needs to hold some currency to make daily exchanges, and as gold and silver are no longer legal tender, at present one will always be exposed to some inflationary loss, unless he engages solely in barter. (And the ubiquitous taxes of modern life make it almost impossible to live entirely cash free.)

7. I have covered this ground several times before, so if my present explanation is in anyway unclear or otherwise unsatisfactory, try reading my alternate explanations and definitions in "The Limits of Technocracy", "Our Financial Problems", "Monetary Issues Made Simple Part I", "Not Entirely to Blame", "D i c k Morris Gets His Economics Wrong", "Explaining Past Crashes", "The Inflation Engine", "Nation of Debtors", "The Problem With Economic Debate", "Alan Greenspan's Hubris", "Inflation and Uncertainty" and "Why Gold?". Several also cover the formation of the Federal Reserve, a topic this post covers only in passing, so they may be useful supplements int hat regard as well.

8. As this is not an essay on free banking, I won't go into this at length. I will say that so longer as banks are not centralized, and bankruptcy laws recognize 100% shareholder liability (concerning bankruptcy laws see "" and ""), there would never be a general inflation under a free banking system, or at least it would be so unlikely as to be effectively impossible. But, as I said, I will wait to write a full essay on free banking in the future. Anyone curious about the topic can find some partial thoughts in my posts "", "" and "".

9. The nominally conservative monetarists and other macro-economic theorists postulate that some small (some argue fixed) rate of inflation would be economically beneficial. I leave it to my readers to decide if a small, constant act of theft is morally acceptable, or economically helpful, once they have read this entire essay.

10. Most often modern currency in the US is created through Federal Reserve "open market operations". The Fed basically "buys" government debt by creating demand deposits. The government then uses this money to make other payments. As the debt purchased is a valid "reserve", it can then support new credit of about twice the value of the debt (in addition to the deposit used to purchase it). However, this is not the only way money of various sorts can be created. Then again, as the methods used are of much less importance than the fact that the money supply has increased, it isn't worth going into all the means by which central banks create money.

11. Expectations are where the old mechanistic theories of currency failed. They assumed only the amount of currency in circulation determined its value. However, if people expect future devaluation of the currency, they will begin trading at a discount, even though the currency has not yet been devalued. However, for our purposes here, we will consider only the quantity of currency, as expectations are too difficult to include, and, in any case, would only exaggerate the effect we are examining, but would not change the general principle. For a short discussion of this topic, read "Monetary Issues Made Simple Part II" and "Inflation and Uncertainty", both of which go into a bit more detail about the role of expectations, or read on as I cover this topic later in the post.

12. What the Federal Reserve is required to count against its reserve ratio is not identical to many of the definitions of "money supply". They generally need to have debt to back a percentage of demand deposits, lines of credit, and a few other categories. The technical "money supply" is a term with too many definitions, mainly because, as monetarists theories fail to work out in reality, the defense is traditionally that "they looked at the wrong M", that is, they measured money supply by the wrong standard, and a new standard would tell us the "just right" amount to inflate to achieve eternal prosperity. It is nonsense, but politically popular nonsense in some quarters.

13. I call quantitative economic "shoddy" mainly because it attempts to do quantitative analysis of inherently subjective phenomena, and suggests it can perform deeds far outside of the realm of possibility. See "The Limits of "Scientific" Management", "The Limits of Econometrics", "The Limits of Technocracy" and "Technocrats".

14. Not that desiring more spending implies insincerity. Many who want to give government the ability to spend more sincerely believe that spending will do good. Some may want to spend out of more mercenary motives, but spending, in and of itself, is not a sign of questionable motives.

15. This is base don the notorious "Philips' Curve" that proposes that the amount of unemployment is inversely proportional to inflation. IN short, we can have full employment only to the degree we accept higher inflation. It is nonsense, but is accepted not only by Keynesians, but by supposedly conservative monetarists as well.

16. In a few rare cases, such individuals may profit at first, especially if they invested their savings, as sometimes during the early inflationary enthusiasm, stocks rise to absurd heights before crashing. But unless they get out at precisely the right moment, the inevitable crash always more than compensates for earlier gains, so only a lucky handful normally profit more than they lose, if that.

17. In some ways, the efforts to depreciate currency to the detriment of other nations resemble the many other subtly and overtly hostile acts undertaken in the name of protectionism. As a result, many of these actions can be better understood by reading my posts "Protectionism Right and Left", "Free Trade, Employment, Outsourcing, and Protectionism", "Cash For Clunkers Revisited",  "War Stimulates the Economy? Let's Nuke San Francisco!", "Jobs, Jobs, Jobs, and More Jobs" and "Clarfiying My Argument".

18. As should be obvious, I first addressed this topic in "Inflation and Uncertainty". You can also read about the problems of using monetary measures in "The Rubber Yardstick", though that post does not deal specifically with inflation.

19 See "Nation of Debtors".

20. For a little discussion of thwe death tax see "Greed Versus Evil" and "A Great Quote".

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NOTE

Completely off topic, but I have noticed that TH's language filters have changed in the recent past. I linked just a few months ago to my post "D i c k Morris Gets His Economics Wrong" without problem. Now I need to insert spaces in his first name, as well as that of our last vice president. Has anyone else noticed recent changes in this silly filter? (I complained before -- in the postscripts to "Are We Really That Stupid?" and "Protectionism" -- about the absurdities of this filter, but at that time at least the most common nickname for Richard was not banned.) And is it just me, or is it absurd for a language filter to ban a name that appears on their front page, as well as their list of columnists? Were TH to operate under the restrictions of their own language filter, they could not publish one of their own writers. (Actually, I wonder, as the same filter seems to apply to comments, whether this has been noted by those commenting on Mr. Morris' column. I stopped reading him regularly, as he frustrated me too often, so I haven't been in position to notice if that has been the case.)

POSTSCRIPT

The earlier Bad Economics posts were:

Bad Economics Part 1 - A discussion of how prices disprove theories of resource depletion
Bad Economics Part 2 - A debunking of the many theories based on "defective" or "damaging" competition
Bad Economics Part 3 - An examination of the many absurd claims about deregulation
Bad Economics Part 4 - An examination of problems with economic studies and empirical evidence
Bad Economics Part 5 - An examination of consumer protection and the harm it does to consumers and others
Bad Economics Part 6 - A rebuttal of claims offered in support of various types of farm price supports and other aid

You can also read them in reverse order, starting with part 6, as each post contains links to the previous chapters.

POSTSCRIPT II

In my final paragraphs, in which I describe the harm done by inflation, I should probably make clear that the degree of harm is directly related to the quantity, regularity and duration of the inflation. But there is also no exact formula. Many times, chronic, slight inflation may do little harm, but at other times, the exact same circumstances may result in tremendous damage. And that is perhaps the worst aspect of inflation, the unpredictability. As it is partly dependent on human expectations, inflation is not mechanistic or predictable, and so we can't say with certainty "3% inflation is harmless", only "it didn't do harm in the past."